Pet adoption
The first trend is an increase in pet adoption. According to data from industry analysts released by Chewy during its earnings call, the number of pet-owning households increased 5.7% in 2020, up significantly from the pre-pandemic five-year compound annual growth rate of 0.6%.
During the year, the creation of pet profiles for puppies and kittens went up by 35% YoY and the creation of profiles for newly-adopted pets rose by 40%. The need for food and toys for these pets paves the way for more recurring revenue and growth opportunities in the coming years.
Market opportunity
At present, Chewy competes in approx. 70% of the $100 billion US pet market, mainly in areas like food supplies, prescription drugs and diet. The company believes it has the opportunity to expand further into areas like healthcare and services which is worth an additional $30 billion. The US pet market is projected to reach $120 billion by 2024. Chewy’s net sales for 2020 amounted to $7 billion, giving the company ample opportunity for growth and expansion in this market.
Ecommerce
Thirdly, the US pet market is witnessing a rise in ecommerce penetration. The rate of online penetration in the retail food and supplies category is estimated to have increased from 7% to 30% in the five years ranging from 2015 to 2020. This is projected to reach 53% in another five years, i.e. by 2025.
Chewy is seeing pet-related healthcare and services move to online channels and believes this trend will continue to grow over time. The company believes these shifts to online channels are here to stay and they will provide opportunities for further growth and market share gains.
Click here to read the full transcript of Chewy’s Q4 2020 earnings conference call